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What about Northern Rock’s boss?


by Sunny Hundal    
November 20, 2007 at 3:55 pm

Northern Rock shares are now suspended from trading. With all the questions being posed about its future, why isn’t more being said about how its boss has benefitted from his extremely bad performance? According to this report Adam Applegarth may, “gain access to a pension with a transfer value of more than £2m and a possible pay-off worth nearly £800,000.”

I’ll let Steve say the rest:

Over the last year he has been quietly selling his shares in the company, which enriched him by £2.6 million, and drawing £1.3 million in salaries and bonuses. All while he was urging people to invest in the bank yet, at the same time, steering it towards financial collapse.

This is robber-baron capitalism at its worst. His extravagant lifestyle has been funded at the expense of investors and now of the taxpayer too. Proof yet again that, once you make it into the upper class, there really is no such thing as failure any more. Whatever you do, the  money will just continue to roll in and someone else will pay.

Indeed.


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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
· Other posts by Sunny Hundal

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6 responses in total   ||  



Reader comments

The response from the Right to all questions of “fat-cat” pay is that this is simply the market rate, and that any salary is justified if the shareholders think it will earn them money. Risk and failure are built into this equation and one should insure oneself against them.

On this basis, then, a few questions:

1. Did Northern Rock, under Applegarth, make money for his shareholders prior to the recent debacle?
2. How does this pay-out compare to the bonus he would have received, had NR posted a healthy profit? If it is substantially less, then we face the argument that he has, mathematically, been “punished” for failure.

Thanks for the info Sunny! Anyone who buys NR shares at this point would have to be mad!

Never mind the fat cat pay. Go read the FT article and the excellent blogging by Richard Murphy at http://www.taxresearch.org.uk/Blog on the unethical structuring of Northern Rock debt by top managers to put the Northern Rock charity and the deposit savers first in line when the collapse occurs…

While I really struggle to defend someone like Applegarth (whose only historical parallel is the Captain of the Titanic), I might be a little more careful than Steve in my language. Reasonable people might think it lowers him in their estimation, if you get my drift. Then again, reasonable people wouldn’t have bet the house on the international money markets.

It’s worth pointing out, though, that borrowers and savers knowingly took advantage of the offers Northern Rock’s strategy was funding, and all forms of investment carry risk. My take is that this bank should have been allowed to fail as a lot of people would have learned a lot of lessons. As it is, we have all ended up paying for the folly of the few.

Incidentally, Robert, fat cat pay is not a disease combined to the private sector. Recent research shows that after financial services, the biggest pay packets are infact at director level in the public sector. The directors of privately-owned firms (i.e., most UK businesses) are, on average, paid less.

No, Morris, I don’t get your drift.

Explain please.

6. Stephen Rouse

It wasn’t not just Applegarth. The former chairman, Viscount Ridley, has long been a proselytiser for extreme free market policies. His book “The Origins of Virtue” has a chapter on trade with the telling sub-title “in which exchange makes two and two equal five.” There, in a nutshell, you have libertarian economics and Northern Rock’s operational strategy for the past few years. I wouldn’t mind, but these guys have wiped 20% off the value of my Halifax shares…


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